Medicaid Policy                                                                 

594-4.2 Value of Preneed Funeral Contracts Funded with Life Insurance

Effective Date: August 1, 2007

No Previous Policy

1. The value of the pre-need funeral contract funded with life insurance is the cash value of the life insurance policy (521-16). The cash value of the policy is the countable asset.  The face value of the life insurance policy is not a countable asset.

2. The pre-need funeral contract, itself, without a life insurance policy assigned to fund it, has no value.  The contract is not saleable because it is part of the agreement to use the life insurance policy to fund the contract.  

3. A life insurance policy that does not generate a cash value is not an asset (521-16, #2B, ABD Medicaid).  Therefore, a pre-need funeral contract has no value when funded by a life insurance policy without a cash value.

4. The individual must designate dividend accumulations as burial funds to have them considered for the burial funds exclusion.  Dividend accumulations have a resource value separate from the cash value of the life insurance.  If the ownership of the life insurance policy has not been irrevocably assigned to the funeral provider, then the dividend accumulations are a countable resource.

5. When ownership of the life insurance policy is irrevocably assigned to the funeral provider, the ownership of the dividend accumulations is also assigned.  The assignment and the contract are the designation of the dividend accumulations as a burial fund.  Therefore, unless you have contrary evidence, assume that dividend accumulations are also assigned if ownership of the life insurance policy has been irrevocably assigned to the funeral provider.